California enacts drug pricing transparency bill

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Dive Brief:

California Governor Edmund G. Brown Jr. has signed State Bill 17, authored by Senator Ed Hernandez, D-West Covina, which will requires pharmaceutical companies to give notice before hiking the price of drugs.

The bill requires 60 days' notice for price rises of over 16% in any two year period for drugs that have a wholesale price of over $40 for a month's supply.

Health plans and insurers will also have to file annual reports describing the impact of drug costs on healthcare premiums in California.

Dive Insight:

The legislators have got the pharma industry right in their sights at the moment. Last week the Association for Accessible Medicines, the generic drugmakers trade body, failed to block House Bill 631, which applied to non-branded drugs. This was designed to give state Attorneys General the wherewithal to curb price-gouging by allowing them to take action against manufacturers raising prices by excessive amounts.

Meanwhile, the California legislation, known as SB 17, covers "prescription drugs, including generic drugs, brand name drugs, and specialty drugs."

"Drug companies abuse their market power by jacking up prices, and the public is looking to their government for help," said Senator Hernandez. "Requiring drug companies to provide advance notice and some explanation for large price hikes is a step toward a more stable and predictable prescription drug marketplace. Sometimes even a modest change brings about big results. Transparency will make drug companies pause and consider whether drastic price increases are appropriate," he added.

Perhaps unsurprisingly, there is a push back from the industry. "SB 17 ignores the reality that spending on prescription medicines remains a much smaller portion of overall health care spending. It also fails to recognize the value that medicines bring to patients and the health care system, as well as the enormous economic contributions that the research-based biopharmaceutical industry brings to the state of California," said PhRMA deputy VP of Public Affairs Priscilla VanderVeer in a statement to BioPharma Dive

Despite all its promises, the federal government hasn't come up with the goods on drug pricing and individual states are therefore stepping in with their own legislation. The bills so far have simply thrown a light onto pharmaceutical companies' pricing practices rather than actually limiting the price hikes. Any attempts at transparency can be clouded by the often secretive negotiations between manufacturers and pharmacy benefit managers, and a blame game for price hikes played between the two sides.

"There is no evidence that SB 17 will lower drug costs for patients because it does not shed light on the large rebates and discounts insurance companies and pharmacy benefit managers (PBMs) are receiving that are not always being passed on to patients. Nothing in SB 17 will help patients get the benefits of the savings that insurance companies and PBMs are getting," VanderVeer added.

So what's next? PhRMA says that it is ready to work with governors, legislators and healthcare stakeholders to improve affordability and access for patients. "It’s time to move beyond creating new, costly bureaucratic programs that don’t make a dent in patients’ costs for medicines. We stand ready to work with policymakers on new innovation strategies that emphasize value while bringing down costs and expanding access to needed medicines," she said.